8.III.1.6.1 Goals of equity post-trade transparency

One of the main novelties of MiFID I was the abolition of the ISD concentration-rule. The increase in competition implied fragmentation risks. During the ISD-review, the Commission noted that the dispersal of trading across a number of order-execution venues (fragmentation) could result in disconnected liquidity pools. The Commission argued that ‘(i)f unchecked, this process could work to the detriment of the two critical attributes of a successful financial market – liquidity and efficient price formation’.1 In line with its reasoning, the Commission proposed post-trade transparency obligations to apply to investment firms trading outside RMs and MTFs.

The European Parliament and Council upheld a similar perspective. The European Parliament and Council, in imitation of the Commission, noted that transparency rules were needed to ensure the effective integration of Member State markets, to promote the efficiency of the overall price formation process for financial instruments, and to assist the effective operation of ‘best execution’ obligations.2 The European Parliament and Council stated that these considerations required a comprehensive transparency regime applicable to all transactions in shares irrespective of their execution by an RM, MTF, or investment firm operating outside such venues.3

The positions of the Commission, European Parliament and Council were apparent in the final MiFID I framework. MiFID I intended to uphold a high degree of post-trade transparency, whether the trade took place on an RM, MTF, or investment firm operating outside such a venue.4